CHS seeks to terminate spinoff agreements amid feud with Quorum

Franklin, Tenn.-based Community Health Systems is seeking early termination of transition services agreements the company signed with Brentwood, Tenn.-based Quorum Health in 2016, according to a recent Securities and Exchange Commission filing by Quorum.

The agreements at issue were entered in connection with Quorum's spinoff from CHS in April 2016. The agreements define services to be provided by CHS to Quorum, including those related to payroll processing, information technology, billing, collections, patient eligibility screening and certain human resources functions.

The transition services agreements generally have five-year terms, but CHS is seeking to end two of the agreements Sept. 30 or sooner if both sides agree to an earlier termination date. CHS is also open to discussing early termination of other agreements related to the spinoff, according to the SEC filing.

The dispute over the two agreements dates back to August 2017, when CHS sent Quorum a demand for arbitration seeking payment of certain amounts allegedly withheld by Quorum under the agreements. While CHS claims Quorum owes $9 million under the two transition services agreements, Quorum contends CHS issued the bills improperly.

"We intend to vigorously contest the charges as not payable to CHS under the transition services agreements and have made a counterclaim for termination of the agreements as well as substantial damages we believe we have suffered as a result of the transition services agreements and other actions taken by CHS in connection with the spinoff," Quorum said in the SEC filing.

The matter is currently pending before the American Arbitration Association, and the arbitration is scheduled for June 18-29. A decision is expected in early August.